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  • In the recent case of Ku-ring-gai Council v Chan [2017] NSWCA 226, the Court of Appeal found that a principal certifying authority is not responsible for certifying that building works do not, or are not likely, to contain latent defects or that the works comply with the relevant plans or conditions of the development consent.
  • This significantly narrows the scope of claims that can be brought against PCAs for economic loss caused by building defects.
  • An occupation certificate from an owner-builder will not hold much value for a purchaser, as it does not indemnify the purchaser should latent defects be later found.

In Ku-ring-gai Council v Chan [2017] NSWCA 226, the NSW Court of Appeal considered the issue of whether Ku-ring-gai Council (‘the Council’) owed the subsequent purchasers of a renovated property a duty to take reasonable care in issuing an occupation certificate to avoid suffering economic loss as a result of the previous owner-builder’s defective building work. Ultimately, the Court found the Council in its capacity as a principal certifying authority (‘PCA’) did not owe a duty of care to avoid pure economic loss to prospective purchasers of a property when issuing an occupation certificate.

Fact summary

The purchasers, Ms Chan and Mr Cox, bought a property in Wahroonga which the previous owner-builder had renovated. The Council as PCA undertook inspections of the property in order to ascertain whether an occupation certificate could be issued. The Council did not identify any substantial or structural defects and subsequently issued an occupation certificate. However, the renovated property did in fact contain structural defects and did not comply with the engineer’s drawings or the approved plans, all of which the certifier failed to ascertain. The purchasers brought a claim against the owner-builder for breach of the statutory warranties pursuant to the Home Building Act 1989 (NSW) and against the engineer and the Council for breach of their duty of care to the subsequent owners.

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